RIL AGM 2020: Reliance Industries likely to be a $400 billion company in three years, analysts say

Billionaire Mukesh Ambani-led Reliance Industries (RIL) will create value for shareholders in coming years given the strategic partnerships with global tech giants, experts said after company's 43rd Annual General Meeting on July 15.

Reliance Industries share price more than doubled in a span of nearly four-months and hit a record high of Rs 1,978.50 today (before seeing some profit booking), taking the total market capitalisation to $167 billion (rupee/dollar rate at 75 a dollar) and entering in the top 60 most valued companies list globally.

Given the investment by global tech giants like Facebook, Google etc., and company's focus on Jio Platforms and Retail with digitalisation and advanced technology, experts feel the total value of Reliance Industries could be over $250 billion in the next 12 months and around $400 billion in three years down the line.

"I valued Reliance Industries at $200-210 billion now which soon become more than $250 billion," SP Tulsian of sptulsian.com told CNBC-TV18. "$70 billion to oil-to-chemical (O2C) business, $80 billion to Jio, $40-50 billion to Retail and $10-20 billion for investment and media businesses, which total comes to $200-210 billion," he explained.

He sees Reliance Industries in total a $400 billion company in three years down the line, with new tech business, Jio, Retail and hiving off O2C business. "I expect valuation of $170 billion for Jio and $100-150 billion for Retail."

Jio Platforms has an excellent value, he said, adding, "Reliance may keep 60-70 percent shareholding in Jio Platforms as I am hoping that Microsoft Corporation may invest in Jio, while for the time being, Retail will remain 100 percent in shareholding with Reliance which will hive off O2C business as Reliance could only be Jio and Retail in coming years."

The key highlight of today's Annual General Meeting was the complete focus on Jio with becoming a global giant, apart from the Google's investment of Rs 33,737 crore for a 7.7 percent stake in Jio Platforms, completion of fund raising plan, readiness with a world class 5G solution with focus on exporting same, expected entry into level 4G or even 5G Smartphone industry, increase focus on JioMart, committed to deal with Saudi Aramco and focus to induct global partners/investors into Reliance Retail in next few quarters.

"Jio held center-stage at the Reliance AGM held today. The AGM marked the global view of the company in terms of investments in Jio Platforms as well as taking the lead in developing the home made 5G platform for the world," Ajay Khandelwal, Head PMS at Globe Capital told Moneycontrol.

He believes the AGM was a watershed event in the history of Reliance with digital services gaining precedence over the traditional Oil and Petrochemicals business. The CMD announced hiving off the O2C business into a separate company.

"These developments and the eventual demerger of the company will create a lot of value for the Reliance shareholders in coming times over medium term," Khandelwal said.

Viram Shah, CEO and Co- Founder at Vested Finance also said Jio has played a pivotal role in the acceleration of data adoption in the country.

"Going forward it's role is only set to become even more important. The Google partnership adds another technology offering for Jio. Now they not only provide the phone and the network, but they can also provide the operating system in the phone via the newly proposed Google and Jio joint development plans. On top of the phone, Jio will provide a gamut of services ranging from e-commerce to mutual funds to video content. Jio is on track to build a truly unique technology ecosystem, something the world might not have seen before," he detailed.

On the share price front, experts expect the limited upside in stock in short term given the sharp run up seen in last four months but feel the longer term remains strong and advised buying on dips.

"On the financial side, it has a health balance sheet, net debt-free status, strong management and promising growth prospects across businesses. We remain positive on the company's long term growth plans and would advise investors to hold the stock for healthy returns. Fresh investment in RIL to be made only on dips," Religare Broking told Moneycontrol.

Today's correction (stock fell 3.7 percent) was largely a profit booking given the run up it has by more than 100 percent from March lows, as overall AGM outcome and announcements missed hopes and expectations of markets participants, said Prashanth Tapse, AVP Research at Mehta Equities who feels the upside could be limited in the short-term to around Rs 2,000-2,050.

But he advised investors to use current market price volatility to accumulate the stock as partnership deals with Facebook and Google will take time to deliver growth.

SP Tulsian feels Rs 1,750 is good support and Rs 1,800 can be good entry point. "I expect the story of monetisation in Reliance Retail in the next six month’s time."